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Economy shrinks stronger at the end of 2024 – exports weak
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There is no trend reversal in sight for the German economy. In the final quarter of 2024, she shrinks more than expected. While consumers spend more money, exports are significantly downhill.
The German economy also finds no way out of its crisis at the turn of the year – and the view of the new year gives little hope. In the fourth quarter of 2024, the gross domestic product shrank by 0.2 percent to the previous quarter and thus somewhat more than initially assumed, as the Federal Statistical Office in Wiesbaden announced according to an initial estimate. The authority had recently assumed a minus of 0.1 percent.
While the consumer expenditure of private consumers rose at the end of the year and the state also spent more, exports were “significantly lower” than in the previous quarter, the statisticians wrote.
“The economy is trapped in a stubborn stagnation,” said economist Sebastian Dullien from the Institute for Macroeconomics and Economic Research (IMK) of the Hans Böckler Foundation. China’s aggressive industrial policy is increasing to export and the threats of US President Donald Trump unsettled with new tariffs.
“At most bloodless upward movement”
Also in 2024, the gross domestic product dropped by 0.2 percent in the previous year, as the statisticians reported and thus confirmed an earlier estimate. The German economy has shrunk for the second year in a row. It has been the longest recession for more than 20 years: Most recently, German economic output 2002/2003 had decreased two years in a row.
In the new year there is no end of the weak phase in sight. “For the first quarter, the early indicators such as the IFO business climate or the order inputs are unfortunately not yet getting any improvement,” wrote Commerzbank chief host Jörg Krämer. “From spring, a bloodless upward movement is becoming apparent.”
German economy also under pressure in 2025
It was only on Wednesday that the Federal Government caught its growth forecast for 2025 to 0.3 percent after expecting an increase of 1.1 percent in autumn. The Bundesbank and the Council of Experts (“economic”) also predict only a mini growth of 0.2 percent or 0.4 percent. It is only in 2026 that the Federal Government expects a greater economic growth of 1.1 percent.
Consumers’ consumption expenditure is also not sufficient support for the economy. Dull prospects on the labor market unsettled consumers, explained Thomas Gitzel, chief economist of VP Bank. “In such an environment, the wallets are not opened far.” Early indicators at least indicated soil floor formation. “In the spring months, positive growth rates could be due again.” However, the trees would not grow into the sky.
Hope for a change of politics, worries about Trump
Increasing key interest rates from the European Central Bank (ECB) could continue to give thrust for the economy, because this makes loans to companies and private individuals cheaper – for example for house builders.
But the uncertainty remains great, not only because of Trump’s customs threats, business associations hope for a change of policy after the election on February 23. The Kiel Institute for the global economy estimates that the economic impulses of a new federal government would probably come into play at the earliest in 2026. And economist Dullien sees the risk that after the Bundestag election, no rapid formation of a government capable of acting succeeds or that it neglects economic policy – in favor of migration issues.
Longest stagnation phase of post -war history
The German economy has hardly been growing for years and lags behind in international comparison. According to the IFO Institute, the price-adjusted gross domestic product in 2024 was only a little higher than in 2019 before Corona pandemic. Germany thus runs through “the longest stagnation phase of post -war history”.
The crisis is increasingly arriving on the job market. Almost all branches of industry wanted to make do with fewer employees, the IFO Institute wrote. Especially in industry and trade in business, to reduce jobs.
Last year, important industrial sectors such as car and mechanical engineering produced less, which shrank exports, the investments in machines, devices and vehicles fell vigorously, and the construction industry suffered from the crisis in housing construction. Consumers’ consumption expenditure only grew slightly. Many people keep their money together in the face of increased prices and take care of their job. At the same time, Germany is suffering from high energy prices and great bureaucracy.
dpa
Source: Stern